The FCPA And South Asia

[If FCPA Professor is a valuable part of your day, please consider taking a moment to register your support in the LexisNexis Top 25 Business Law Blog contest. The link to submit comments is here and the comment period ends on October 25th]

Yesterday, I had the pleasure to participate in the South Asia Legal Studies conference at the University of Wisconsin Law School. I participated in a panel moderated by Andy Spalding (here – Visiting Assistant Professor at Chicago-Kent College of Law) titled “Corruption in South Asia: The Role of Law and Legal Institutions.”

The focus of my remarks addressed the following question: are U.S. companies (or other multinational companies subject to the FCPA) doing business in South Asia intent on engaging in bribery or are such companies doing business in South Asia confronted by conditions not of their own making (the later comment inspired by Joseph Covington’s recent observation regarding a potential FCPA compliance defense – see here).

I noted, as evidenced by recent FCPA enforcement activity in India, Bangladesh, and Pakistan, that the latter seems to be true. South Asia is plagued by harassment bribes. For instance, according to the 2010 Transparency International Global Corruption Barometer – here – 54% of Indian households paid a bribe in a 12 month period to receive basic services. As noted in this previous post, Kaushik Basu (India’s Chief Economic Advisor) recently stated that “harassment bribery is widespread in India and it plays a large role in breeding inefficiency and has a corrosive effect on civil society.” This 2010 National Public Radio piece noted that “getting things done without hassles [in India] requires a bribe.” The piece observed as follows. India is “famous for paperwork, tangled bureaucracy and the courts are slow. So, often it just makes economic sense to shrug and pay the money. Because when you bribe someone, they can become like your own personal Ganesh, the god who is the remover of obstacles.”

FCPA enforcement in South Asia has almost exclusively focused on harassment bribes, payments made by companies, nearly always with the assistance of local agents, consultants, and brokers, simply to get things done and remove obstacles. For instance, the Diageo enforcement action concerned, in part, payments in India in connection with product label registration and securing favorable product placement and promotion. The Wabtec enforcement action concerned payments in India in connection with the scheduling of pre-shipping product inspections, issuance of product delivery certificates and tax audits. The Dow enforcement action concerned payments in India in connection with registering products. The Avery Dennison enforcement action concerned, in part, payments in Pakistan in connection with obtaining bonded zone licenses and to overlook bonded zone regulatory violations. The Baker Hughes enforcement action concerned, in part, payments in India in connection with shipping permits.

Are the above FCPA enforcement actions the best way to address harassment bribes in South Asia and other parts of the world?